For US software major, the all-cash deal opens window to Finnish handset-maker’s patents, markets
Software giant Microsoft Corporation on Tuesday announced it will acquire Nokia’s mobile devices and services business for $7.2 billion in an all-cash deal. Microsoft will buy all of Nokia’s patents, licence and mapping services.
Under the terms of the agreement, Microsoft will pay €3.79 billion to purchase the mobile phone business, and €1.65 billion to licence Nokia’s patents. The transaction is expected to close in the first quarter of 2014.
Analysts said the deal was skewed in favour of Microsoft and is being seen as a bailout for Nokia, which has been struggling to fight competition from Apple and Google-controlled Android-based phone makers. “Motorola, which was at a much weakened position in 2012, was sold at over $12.5 billion to Google and Nokia has been valued at just over $7 billion. This is clearly a distress sale,” said a former Nokia executive.
For Microsoft, the buy will give it access to mobile hardware bringing it at par with Google and Apple. Steve Ballmer, Microsoft Chief Executive Officer, said: “It’s a bold step into the future — a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services.”
Transfer of staff
Under the terms of the agreement, 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembling and packaging of products worldwide. The operations that are planned to be transferred to Microsoft generated an estimated €14.9 billion, or almost 50 per cent of Nokia’s net sales for the full year 2012.
The deal hasn’t gone down too well with the Finnish people. Alexander Stubb, Finland’s Minister for European Affairs and Foreign Trade, said on his Twitter account: “For a lot of us Finns, including myself, Nokia phones are part of what we grew up with. Many first reactions to the deal will be emotional.”
In India, the deal is expected to pave the way for Microsoft to leverage Nokia’s strong distribution and manufacturing base. The factory at Sriperumbudur near Chennai is one of the biggest for Nokia. The workers’ union at the Nokia factory near Chennai does not yet know the details of the deal, according to A. Soundararajan, Honorary President of Nokia Workers’ Union. But as along as the workers are not adversely affected, the global transaction is not a concern, he said.
Nokia shares rose 36 per cent to €4.03 in Helsinki, valuing Nokia at €15.1 billion. That compares with a $263 billion market capitalisation for Microsoft, whose shares fell 5.6 per cent to $31.52 in New York.